In the opening scene, a man wearing a uniform with EPA stamped on the right sleeve, investigates an old house in the dead of night. After finding footprints and a strange yellow substance on the ground, he enters the house through the basement door and after looking around, finds an arm belonging to a dead person. Suddenly an unseen person attacks him and picks him up by his neck and kills him.
In the next scene, we see two men driving a white convertible car along a rural country road somewhere in rural Georgia. They are Josh Cameron (Wings Hauser) and his younger brother Mike (Lee Montgomery) who soon run into trouble when they're run off the road by a pickup truck full of rednecks and find themselves looking for a gas station. They hitch a ride in another pickup truck where the driver takes them to a fork in the road who tells them that the nearest town is Goodville which may have a phone and a garage.
Josh and Mike arrive in Goodville in the middle of the night which resembles a ghost town. They see a man stagger out of a local bar called Jack's Tavern. Mike hears a noise where he investigates and finds the man dead in an alleyway. Josh and Mike go inside the bar where they ask the barman Jack for a telephone to call the police to report a dead body. But the same rednecks who ran them off the road are at the bar and their leader, a sadistic and psychotic hillbilly named Albert accosts them which leads to him pulling out a knife and trying to kill them leading to a barroom brawl which is broken up by the arrival of Sheriff Will Stewart (Bo Hopkins) which force Albert and his gang to leave, but they vow to kill the "Yankee city boys".
Mike leads Josh and the sheriff back to the alleyway only to find the body gone and another derelict there. Mike tries to explain that the derelict is not the same man, but both Sheriff Stewart and Josh do not believe him. However, Sheriff Stewart finds some suspicious yellow fluid on the ground and takes a sample of it. He tells Josh and Mike to get their car repaired and leave town by the next day.
With no motel in town, the sheriff drives the two brothers to a boarding house to spend the night (the same ominous house from the opening scene) where they are given rooms by the cheerful inn owner Mrs. Maley. As Josh and Mike settle in, Mike hears a notice under his bed and when he looks under it, he is grabbed by an unseen person with deformed hands.
The next morning, Josh wakes up and asks Mrs. Maley where his brother is, but she claims not to know. Josh decides to venture into town to look for him. Mrs. Maley is clearly lying about knowing nothing because she is cleaning up his room after an apparent struggle and hides Mike's clothes.
In town, Josh sees that most of the town is deserted and the only business that is open is Jack's Tavern. There Josh meets the pretty barmaid Holly Pierce (Jody Medford) whom she claims is filling in for her uncle Jack whom is out sick. Holly is a school teacher at a local school and she tells him that most of the students are out sick with some strange illness. Josh and Holly take a walk where they find most businesses closed including the local garage which Holly claims that it has been closed for a week. Holly finds it odd because many of the townsfolk are taking ill with some undiagnosed disease.
Meanwhile, Sheriff Stewart delivers the sample of the strange yellow fluid to his "gal pal" Dr. Myra Tate (Jennifer Warren) for an analysis. She too claims that something is going on in town for the past few weeks for several of her patients have not come to see her and that most of the other businesses in town are closed.
Josh and Holly venture to a local elementary school where they find Billy, a young pre-teen there who claims that his parents have gone after becoming sick. When Josh hears a noise in the school, he ventures down to the basement to investigate and finds a dead body of a young girl. Suddenly, Albert appears... who just happens to be the janitor at the school and tries to kill Josh once again. After a struggle, Josh wounds Albert with seam from a burst pipe and flees. Albert then calls Sheriff Steward and (being the redneck psychopath that he is) tells the police a fabricated story about witnessing Josh killing the young girl. Everyone, including Holly and Sheriff Steward, are skeptical to Albert's story because of his own criminal record. Dr. Tate arrives at the school and asks Sheriff Stewart to have the body brought to the doctor's office for an examination before turning it over to the local county morgue.
When Holly decides to drive for her home, Josh is hiding in the back seat and claims to her that something strange is going on in the town. Alone with her in her house, Josh tries to be intimate with Holly until he collapses. Holly takes him to Dr. Tate who tells Josh that he was temporarily infected by a chemical reaction of some type which the result of the physical contact with the body of the dead girl. After receiving medical treatment, Josh leaves with Holly and suspects that it may have something to do with a chemical depot warehouse owned by New Era Chemicals that Josh and Mike found outside of town on the day of their arrival.
Meanwhile, Sheriff Stewart drives over to the house of the dead girl's father, Mr. Mitchell, to inform him of his daughter's death only to find the house deserted, with the window shades pulled down and the light bulbs gone from all the lights in the house. Stewart enters a pantry and finds Mr. Mitchell lying on the floor with some strange injuries to his face and arms. When the sheriff asks him what happened, all Mr. Mitchell can says is "the hands. It was their hands". Steward calls his superior Captain Dawson of the county police to report another homicide. But a few hours later, when Captain Dawson arrives at the Mitchell house, the body is gone. The captain suspects that the event was something about Stewart's alcoholism and relives him from duty. Dawson also makes an implied comment about Stewart's latent homosexuality as well.
At the doctor's office, Dr. Tate examines the body of the little girl found at the school and makes notes in her tape recorder about finding a chemical compound in the youngster's body which has somehow taken over her blood, and leaving her with open wounds on both of her hands. Just then, Dr. Tate's co-worker, Vic, whom has been sick and coughing, begins to turn into a grey-skinned, black-eyed, zombie-like creature who attacks Dr. Tate.
The next morning, Josh and Holly travel to the New Era construction site which is fenced off and they discover the secret of the sickness in the town; it is revealed that toxic chemical waste from an illegal dump has turned most of the townspeople into grey-skinned, black-eyed zombies who come out at night and feast on the dwindling population of the town. Josh and Holly barely escape from the facility and dodge bullets from the security guards and workers.
At this point, the movie evolves into a 'Night of the Living Dead'-esq thriller as Josh Holly, and Sheriff Stewart must find a way to not only escape from the town, but also find a way to kill all the mutant zombies before they become victims themselves. Josh first goes to the police station to report his find, only to find Stewart getting drunk after being relieved from duty. Holly goes to her house to check on her sick uncle only to get attacked by him as he rises up a blood-drinking zombie too with his hands as leech-like clamps to suck a victim's blood. Holly is saved by the arrival of Josh and Stewart, forcing the zombie Jack to flee.
Finally aware what is going on and that the creatures are afraid of the light, Josh suggests getting the Georgia State Police into town to help while he tries to find his missing brother. The three of them split up hoping to get out of town before nightfall.
Josh goes to the boarding house where he ventures to the basement and finds the dead bodies of his brother Mike as well as the EPA guy and a few others where it is revealed that the landlady is keeping the zombie mutant of her daughter locked up in the basement and feeding her unsuspecting victims. Josh manages to get out of the cellar and the landlady falls victim to her own zombie daughter.
Meanwhile, Holly and Sheriff Stewart go to the medical clinic to look for Dr. Tate and to take the dead body of the girl as evidence for the state police only to find Dr. Tate dead and several mutant zombies attacking them. Holly is forced to run, while the sheriff is trapped between two groups and is forced to lock himself inside a medicine closet.
As night comes, Holly finds Billy wondering the streets and chases him inside the school where Billy is frightened claiming that his parents have come back and are trying to kill him. A group of zombie school children attack, forcing Holly and Billy to flee inside the boy's room where Billy is killed by the horde of zombie children. Josh arrives and saves Holly, forcing them to flee.
The two survivors drive in Holly's car to the medical clinic to try to rescue Sheriff Stewart. While Holly waits inside the car, Josh goes inside the medical building only to find the sheriff gone and several dead zombies lying around. Just then a large group of zombies emerge from the mist outside and attack Holly in her car, using their toxic powers to literally 'melt' the car windows to get at her. Unable to drive away since Josh had taken the car keys, Holly honks the horn, forcing Josh to run outside where he fights several zombies and manages to get back in the car to drive away. But on their way out of town, a zombie left on the roof of the car forces their car to crash along the town's main street.
Forced to flee on foot, Josh and Holly hide inside the closed garage. Josh and Holly begin to make Molotov cocktails to use when Albert arrives with a shotgun. Deranged to the last, Albert instead tries to use Holly and Josh as 'bait' for the zombies resulting in a struggle where Albert's shotgun is discharges, and giving away their hiding place. The horde of zombies break into the garage, and grab Albert and drag him outside where they apparently kill him as well. Josh opens fire on the zombies with Albert's shotgun until he runs out of ammo. He then lights and throws the Molotov cocktails, setting a few zombies on fire. But more and more of them keep coming, leading to them breaking down the garage door and burst through the windows forcing Josh and Holly behind the counter. Just when it looks like they are both done for, several state police cars arrive and the policemen blast away at the zombies, killing all of them. Josh and Holly venture outside and see that Sheriff Stewart had indeed escaped and brought the state police with him.